Oil: Supply risks keep prices elevated – BNY

BNY’s Geoff Yu notes that Brent has retreated slightly below $100 but remains supported by renewed Middle East tensions, Red Sea and Strait of Hormuz disruptions, and Kazakhstan’s export halt. Institutional flows show high-conviction re-accumulation of energy exposure from a still-depleted base. The report stresses that the oil surge is feeding directly into inflation and interest rate anxiety, with yields rising.

Energy flows rebuild as risks rise

"Institutional energy flows have shifted decisively from liquidation to re-accumulation, and July is the clear inflection point. The sector has moved through three phases since March: heavy selling into the first oil shock, a recovery phase during May and June, and a sharper July rebuild as energy risk returned. U.S. energy flows now show high-conviction buying, with the latest weekly reading at the 83rd percentile and monthly flow at the 90th percentile."

"The key point is that flows are accelerating from a depleted base. Energy holdings remain only at the 17th percentile of the March-July window, well below the early-March peak. That creates an important divergence: investors are buying aggressively, but positioning has not yet been rebuilt to crowded levels."

"Brent’s move back toward $100, renewed disruption in the Red Sea and Strait of Hormuz, U.S.-Iranian escalation and Kazakhstan’s export halt have revived the supply risk premium. Brent’s large gains since March confirm the strength of the move, but the flows show the more important point: institutions are rebuilding energy exposure, and the trade is not yet overcrowded."

"Oil prices are hovering near $100 a barrel after briefly topping that level for the first time since May. This came after President Trump said he was weighing a massive attack on Iran and Houthi strikes on Saudi tankers in the Red Sea raised fears of a wider energy shock."

"The oil surge is feeding directly into inflation and interest rate anxiety, with U.S. and German yields climbing as investors price in greater central bank pressure. The broader risk is that military escalation will now turn into a macro shock through energy."